Rumor Control: Microsoft didn’t admit anything

Yesterday, an Australian business site reported on Microsoft’s warranty extension story and conference call (about 4 days after it happened; see our report here). Okay, so they were a bit late. What is a site to do when they report on a story so late? Make something up! As you know, the story is that Microsoft has extended the warranty of the XBOX 360 to 3 years, covering the Red Ring of Death problem. This will cost them over $1 billion dollars, but they have not said anything regarding numbers of faulty consoles, and they are definitely not recalling all consoles.

Their byline though?

Software giant admits there are 11.6 million faulty consoles, which it will have to fix.

And then the story starts with:

Microsoft has admitted that every one of the 11.6 million Xbox 360 consoles sold in the past 19 months suffers from a design flaw that could cause the device to fail.

What the…? To my knowledge, Microsoft have never (and obviously will never) admit to such a thing. They have admitted that there are problems with consoles, and their support hasn’t been up to par – which is exactly why they took the right steps in spending over $1 billion to extend the warranty coverage to 3 years.

Unfortunately, we live in a world where sensationalist headlines get more attention than articles themselves. The article in question doesn’t have a single quote from Microsoft regarding any numbers whatsoever, aside from the dollar figure everyone knows about. But that didn’t stop other blogs from biting onto the linkbait, and posting their own stories. It even showed up on Digg for a while.

Just to make sure, I looked at the conference call transcript (provided by Joystiq) and there is no mention of how many consoles are faulty, and in fact, that exact question was asked at one point:

Question: David Hilal (Friedman Billings Ramsey): A question on how many units have been affected out of the 11.6 million and is there a problem that’s completely behind it?

Answer: Robbie Bach: Yeah, so we’re not going to discuss, nor have we historically discussed, return rates or specific numbers of units. Suffice it to say that with a billion dollar charge and the focus we’re putting on this that it’s a meaningful number. It’s one that we take very seriously and one that clearly has our attention. In terms of going forward, we do feel like we understand the issues and have made the changes needed to dramatically reduce this problem going forward and that we think we have our hands around it at the engineering level, which is the important thing for us clearly to do. And in fact, as Chris inferred, if you look at our fiscal year ’08 expectations those are on track with what we said in the past and that’s because we feel comfortable with where we are on the engineering side.

So there you have it. Every single console is NOT affected, at least not to anyone’s knowledge. Mine has been fine since launch (knock on wood) though I am glad I have the 3 year warranty to back me up now. If this story were true, this would have cost Microsoft a LOT more than $1 billion, considering the size of the lawsuit 11.6 million console owners would muster up.

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